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Sustainable Agriculture strategy Zurich 8th June 2011 Neil la Croix Director of Supply Chains 1 Core trends in agriculture • Pressure from – – – – – – Water scarcity Erratic climate patterns Population growth increasing demand for staple foods Competition for land against different crops (inc food and biofuels) and limited additional agricultural land Increased costs of agriculture driven by rising oil price impacting fertiliser price and use Reduced investment in agriculture from aid budgets and national Governments • Yields – Generally declining where agricultural practices are weak • – Limited inputs of fertiliser, pest control, new planting material or physical farm management Occasional areas increasing through intensive farming • Fertilisers, Pesticides, GMO • Declining rural communities – – – – Aging farmer base Lack of youth engagement Rural-urban migration and poor living conditions Land tenure weaknesses hindering development • Campaign and policy pressures – – – – – – 2 Environmental impact of fertilisers and pesticides Labour standards and living/working conditions in agriculture (e.g. child labour, bonded labour low pay, Animal welfare High carbon and water footprints Food prices and commodity speculation impact on markets Distortive policies (e.g. biofuels or trade policies) It matters because… For a company that depends on farming for core ingredients on which we spend billions, sustainable agriculture is all about: – Securing and delivering a long term supply of the ingredients we need that guarantees quality and quantity, and delivers competitive value – Protecting and enhancing the reputation of our brands and business – Giving us a message for our stakeholders and consumers 3 Kraft Foods Coffee Commitment: Kraft Foods to source 100% sustainable beans for all European coffee by 2015 Membership of industry bodies and multistakeholder initiatives •European Coffee Federation •Sustainable Commodities Initiative •Sustainable Coffee Partnership •SAI Platform •4C’s Certification 4 •Rainforest Alliance Impact of climate change • WWF survey commissioned 2008 • Two of Kraft Foods five main origins (Brazil and Vietnam) classified as “high risk” of vulnerability to climate change • One (Indonesia) classified as “medium risk” •Address in Sustainable Coffee Strategy 5 Sustainability strategy Strategic Themes Productivity •Increase income •More efficient •Use of inputs •Reduce Activities pressure to expand cultivation Enablers 6 Additional Incomes •Skills training •Access to credit •Youth engagement PES: carbon, water, Knowledge transfer biodiversity Effective extension Industry collaboration NGO partnership Institutional partnership Community Development Institutional Engagement •Community management & Planning •Maintain environment •Education •Healthcare •Energy •Water •Institutional strengthening: •District, national, international •Policy changes •Capacity building NGO partnership Institutional partnership Industry collaboration Partnerships •Kraft Foods can not and should not attempt to tackle alone the issues associated with the sourcing of sustainably produced coffee •Recognition of the value of bringing together players along the supply chain and coordinate efforts on most pressing issues •Many coffee industry activities, need co-ordination and focus •Must form partnerships: •Governments •supranational and national organisations •NGO’s •Farmers organisations 7 Requirements at origin • Origin government engagement • Strong, effective, grower organisations • Community involvement in developing solutions • Effort : Reward equation must work for farmers • Information transfer: technical support, irrigation, fertilisation, P&D control, new varieties • Selection and involvement of NGO partners • Certification bodies 8 The role of certification Provide framework and verification BUT 10% coffee growers certified How to reach the other 90%? Design schemes for SCALE 9 Summary • Kraft Foods identify climate change as a serious risk for coffee • Should not be tackled in isolation but as part of overall sustainable strategy • Effective industry organisation required • Partnerships with growers, NGOs and government critical • Certification scale up mechanisms essential 10 11 12